Retirement Plans

The key to a successful retirement is saving 15% of your net income for a very long time. Unless you hit it big, a very long time means savings over a 30-to-40 year period. That’s a lot money and sacrifice, so let’s make sure those dollars are in accounts that are the most advantageous to you.

The road to retirement is long, and bumpy; understanding these three important vehicles will make the trip a lot easier – and profitable. Some may be available to you, some may not…but any combination of these will form the foundation of a successful retirement savings plan.

The 401(k) or 403(b)

For most families, a company retirement plan serves a very important role. Common examples are a 401(k), a 403(b) (teachers, nurses, ministers, professors), or a Thrift Savings Plan (TSP plans are for government employees and members of the armed forces). These accounts allow you to put away up to $16,500 a year straight out of your paycheck, before taxes. If you are over 50, you can put away up to $22,000 before Uncle Sam gets his increasingly greedy mitts on it.

Some employers actually match a portion of their workers’ 401(k)-type savings. If you are eligible for a company match, take full advantage of the program. It’s free money! The number of employers that match 401(k) contributions dwindled in the wake of the financial crisis but, with the economy on the mend, we may see a return of this powerful savings supplement.

Cisco Systems, which has a significant presence in Atlanta, used to be the most valuable corporation in the world. But in recent years the computer networking company has dropped to 29th on that list, with its workforce shrinking over that same period.

Last week Cisco announced it will lay off another 10,000 people — a whopping 14 percent of its employees. What’s unsettling is that Cisco is still a very profitable company. Last year it had net income of $7.1 billion. But Cisco faces ever-increasing competition and must cut costs and boost efficiencies to meet Wall Street’s relentless demand for profit growth — not just profits. The lesson: Even if you work for a company that is financial strong, you could be included the next round of “early retirement” offers. It’s probably a good idea to be prepared to receive such a “package.” You’ll be ready to make a decision and move forward with your life if you’ve addressed the following issues:

Another job? — The first thing you need to consider is whether you’re really ready to retire. That decision might not be wholly financial. Some people just aren’t ready to stop working when the retirement bell rings. If you want to stay in the game, how quickly will you be able to find a new job? Would you stick to your current field, or pursue another interest? How much income do you want or need?

This article was originally posted on WSJ by an author unaffiliated with Capital Investment Advisors.

If planning for your retirement seems too overwhelming, take a break and focus instead on getting your teen children or grandchildren on the right course toward their later years. High-school students who earn hundreds or even thousands of dollars at a summer job probably aren't thinking of putting money away for decades. But you might plant the retirement-planning idea by funding a small Roth individual retirement account for the teen—or by offering to set aside, say, $2 or $3 for every $1 of taxable income the teen himself or herself contributes. The IRA contribution for this year can be as much as the teen's taxable pay from work or $5,000, whichever is less. The account can be set up and funded as late as the tax-filing deadline next April. There's no deduction for funding a Roth, but in retirement withdrawals will be tax-free. (The teen's earnings from work and any investments determine if a return is required.)

This article was originally posted on WSJ by an author unaffiliated with Capital Investment Advisors.

A growing number of Americans are heading into their retirement years as single adults. With no spouse to rely on, these individuals need to take extra precautions to ensure a secure retirement. Due in part to increases in divorce rates and the proportion of the population that never married, about 35% of 50- to 54-year-olds were single in 2010, up from almost 29% in 2000, according to the Census Bureau. Among 55- to 64-year-olds, 33% were single in 2010, versus 30% in 2000. Because the cost of living for single retirees is about 40% to 50% higher than for empty-nest couples, financial advisers recommend that they save at least 15% of their pay for retirement. "Most couples have two incomes and shared economies of expenses," says Brian Pon, an adviser with offices in Berkeley and Corte Madera, Calif. In contrast, "for single savers, the responsibility of saving falls squarely on themselves."

Advisers say it's especially important for single individuals to take steps to safeguard their nest eggs from creditors and the prospects of unemployment or disability.